| NEW YORK/LONDON
NEW YORK/LONDON Gold eased on Monday as investors took profits, but the metal stayed near a six-month high after last week's disappointing U.S. payrolls data boosted hopes that the Federal Reserve could unveil new stimulus as early as Thursday.
Palladium rose nearly 3 percent on better demand expectation after encouraging Chinese vehicle sales data.
Weak Chinese trade data prompted some bullion selling following three consecutive weeks of sharp gains, gains that were accelerated by the European Central Bank's bond-buying program last week and by hopes for Fed action to stimulate the U.S. economy at its two-day policy meeting to conclude on Thursday.
Investment in gold-backed exchange-traded products (ETPs) reached a record high last week, while some investors took profits after the U.S. Commodity Futures Trading Commission on Friday showed holdings of U.S. gold futures by speculators rose to their highest in a year.
"We could see a pullback in gold at anytime as prices are fairly overbought on a daily basis, and once we hit the $1,800 an ounce level, we think there could be a multi-week congestion," said Mark Arbeter, chief technical strategist at S&P Capital IQ.
Spot gold was down 0.4 percent at $1,728.97 an ounce by 2:42 p.m. EDT (1842 GMT), having risen 2.7 percent last week, racking up a third consecutive weekly increase and its longest stretch of weekly gains since the start of the year.
Despite bullion's sharp rally, its relative strength index (RSI) was slightly overbought at 78 on Monday after rising above 80 in the previous session.
U.S. gold futures for December delivery settled down $8.70 at $1,731.80 an ounce with trading volume set to finish about 45 percent below its 250-day average, preliminary Reuters data showed.
Open interest, which measures the total number of long and short outstanding contracts, rose to a six-month high at near 450,000 lots following a 2-percent increase on Friday.
On weekly charts, gold could complete a very bullish triple-bottom pattern if prices rose above $1,800 an ounce this week, said CitiFX strategists. (Graphic: r.reuters.com/fuw52t)
Inflation worries have underpinned gold after Friday's weak U.S. jobs data stoked expectations that the Fed might choose to use a third round of quantitative easing or print money to buy government bonds to keep long-term interest rates low.
Gold prices have doubled in the last four years as the Fed implemented the first two rounds of quantitative easing.
INVESTORS POUR IN
Holdings of gold in the major ETPs last week touched a record 72.37 million ounces, having drawn in nearly 2.0 million ounces of metal in a month.
Hong Kong's July gold shipments to China nearly doubled on the year, suggesting China is well on its way to overtaking India as the world's top gold consumer.
Palladium, which is used in catalytic converters for gasoline-powered engines, rose 2.7 percent on the day to $666.50 an ounce to hold around its highest since early May, helped by a 8 percent jump in Chinese car sales figures for August.
Platinum rose 0.7 percent to $1,593.10 an ounce, while silver edged down 0.3 percent to $33.56 an ounce.
(Editing by Marguerita Choy; Editing by Bob Burgdorfer)